Technology · Semiconductors
Intel (INTC)
Intel is the leading-edge IDM case: revenue and margin well below prior peaks, heavy gross capex, and a foundry arm still mostly internal.
Selborne Research · · Company Profile
Educational analysis. This profile is not investment advice or a recommendation to buy or sell any security, and it is not personalised.
Snapshot
- FY2025 Revenue
- $52.9B
- Gross Margin
- 34.8% (FY2025)
- Operating Margin
- -4.2% (FY2025)
- Gross Capex / Revenue
- 33.4% (FY2025)
- Foundry Revenue
- $17.8B (FY2025)
- Foundry Operating Loss
- -$10.3B (FY2025)
- Inventory Days
- 123 (FY2025)
- Free Cash Flow
- -$4.9B (FY2025)
Business Overview
Intel is an integrated device maker in leading-edge logic that designs and builds its own chips, now with a foundry arm. FY2025 (year to 27 December 2025) revenue was $52.9B, down from $79.0B in FY2021. Gross margin was 34.8%, down from 62.3% in FY2017 and against 32.7% in FY2024. Operating margin was -4.2%. R&D was 26.1% of revenue and stock-based compensation 4.6%. Free cash flow was -$4.9B.
Gross capex was $17.7B, or 33.4% of revenue; $6.5B was met by partners and government incentives, leaving net capex of $11.2B (21.2% of revenue). Cash-flow additions to property, plant and equipment were 27.7% of revenue. The foundry arm recorded $17.8B of revenue, of which only $307M was external (including assembly and test), and a $10.3B operating loss. Inventory days were 123.
How the Numbers Read
Revenue at $52.9B against $79.0B in FY2021 and gross margin at 34.8% against 62.3% in FY2017 are the under-loading signature of an IDM: depreciation and fab overhead do not shrink with volume. Gross capex still runs at 33.4% of revenue, the same capital-intensity neighbourhood as TSMC, even while the foundry arm loses $10.3B on mostly internal transfers.
Partner and incentive funding of $6.5B narrows the cash capex claim to 21.2% of revenue, but the plant still has to be utilised. Free cash flow of -$4.9B is the cash statement of that gap. The utilisation guide and the peak-versus-mid-cycle guide place Intel's margin history beside foundry and memory swings.
How the Model Values This Kind of Company
An IDM in leading-edge logic is valued on capacity times utilisation times revenue per wafer, with fixed depreciation in cost of goods. Capacity additions arrive on a lag after spend. Under-utilisation shows up as gross-margin compression before the cash-flow statement fully reflects it.
Capex is entered gross, before partner funding. A model that uses net capex should also give away the share of output or profit the partners receive. Stock pay is charged, and terminal value uses mid-cycle free cash flow, not a trough or a prior peak year. A reverse DCF on a fictional company shows what mid-cycle margin a typed price implies.
What to Watch in the Financials
Gross margin versus FY2017 and FY2024. 34.8% against 62.3% and 32.7%.
Gross versus net capex. 33.4% of revenue gross; 21.2% net of $6.5B partner and incentive funding. Both matter: the plant is gross, the cash claim is net.
Foundry operating loss. -$10.3B on $17.8B of mostly internal revenue. External foundry revenue ($307M) is still small.
Free cash flow. -$4.9B in FY2025. The bridge from operating cash flow to FCF is the cash-flow capex line.
Key Risks
Under-utilisation. Fixed fab costs on lower revenue than FY2021 keep gross margin and free cash flow under pressure until loading recovers.
Foundry losses. A $10.3B operating loss on the foundry arm weighs on consolidated results while external customers remain a small share.
Capital intensity without loading. Gross capex at 33.4% of revenue builds capacity that still needs customers.
R&D intensity. 26.1% of revenue is a high cash and expense claim beside negative operating margin.
A chip DCF carries the industry cycle through ten explicit years, then strikes the terminal value on what the business earns in a normal year, because the latest margin may sit at a peak or a trough.
- 17 sections, from the business models and the industry cycle to capital intensity, memory, inventory, equipment orders, stock pay and a reverse DCF
- 44 pages
- a chip designer, a foundry, a memory maker and an equipment maker, all fictional
- 4 worked valuations
- listed chip companies on filed margins, capital intensity, inventory days and stock pay, each with its fiscal year
- 6-company screen
The Excel model is the primer's through-cycle DCF live across 13 sheets: a chip designer, a foundry, a memory maker and an equipment maker, all fictional, plus a column for a company of your own in any of five business-model modes. Each mode turns the industry cycle into revenue its own way: units and selling prices, capacity times utilisation times revenue per wafer, bit demand against bit supply, orders and installed-base services, or wafer starts for a materials supplier. Depreciation sits in cost of goods for fab owners, capacity arrives two years after the capex that pays for it, and the terminal value is struck on mid-cycle cash flow. A reverse DCF reads the margin and the growth a price requires, and the sensitivity grids re-run the model in every cell.
See what's in the Semiconductors Sector Primer →£25 PDF · £59 with the Excel model · £159 for all three Technology industries
Learn the Concepts
Understand the valuation frameworks and metrics used in this analysis.
Peak vs Mid-Cycle Margins for Chip Companies
A terminal year at peak margin overstates value. Filed margin swings and a worked mid-cycle example on a fictional chip company.
Capital Intensity in Semiconductors
Capex to revenue sets what a chipmaker must earn. Spend reaches capacity about two years later; TSMC and Intel are the worked cases.
Capex to Revenue by Chip Company
Ranked capex as a share of revenue for six chip filers. Business model sets the order from foundry and IDM down to fabless and equipment.
Fabless vs Foundry vs IDM vs OSAT
Four chip business models defined by who owns which assets, with margin and capex profiles from Nvidia, TSMC and Intel filings.
Fab Utilisation and Gross Margin
Depreciation is fixed, so a few points of utilisation move gross margin sharply. TSMC billing utilisation and Intel margin decline as worked cases.